With the UK General Election fast approaching, we look at the tax and pension elements contained in the Conservative and Labour manifestos.
This year’s UK General Election is more important than ever, not least because, after fourteen years in power, it is possible that the Conservative Party will cede power to the Labour Party. A new government is likely to implement tax and pension reforms to match their policies.
Election manifestos and their tax and pension policies
In essence, the manifestos published by political parties before an election outline the policies they are committed to implementing should they win the election and form the next Government. Typically, they contain the promises they wish to be held to accountable for.
The Conversative Party has pledged to –
- Not raise the rate of income tax or VAT.
- Not increase capital gains tax (CGT).
- Keep Principle Private Residence Relief so that people’s homes remain CGT free.
- Introduce a two-year temporary CGT relief for landlords who sell to existing tenants (no details of what this means in reality is contained in the manifesto).
- Not raise corporation tax.
- Following recent cuts in National Insurance Contributions for workers, cut NIC by a further 2% over the next parliament and remain committed to reducing this figure until it is gone.
- Abolish the main rate of NIC (Class 4) for the self-employed within five years without impacting their entitlement to the state pension.
- Retain the Enterprise Investment Schemes (EIS), Seed Enterprise Investment Scheme, Venture Capital Trusts (VCTs), Business Asset Disposal Relief, Agricultural Property Relief (APR), and Business Relief (BPR).
- Introduce a new ‘age-related personal allowance’ for pensions to ensure that a ‘triple lock’ increase in the state pension will never be subject income tax.
- Maintain the current pension 25% tax-free cash rules (which currently is subject to a maximum amount of £268,275 or an individual’s protection figure if higher).
- Maintain pension contribution tax relief at an individual’s marginal rate of tax.
- Not extend employers’ NIC to pension contributions.
- Have a renewed focus on tackling tax avoidance and tax evasion (no details of the thinking are contained in the manifesto other than they aim to raise £6 billion a year).
Separately, and of particular interest for expatriates, the Conservative manifesto also contained a commitment to appoint a Minister for British Citizens Overseas in support of delivering a previous manifesto promise for overseas British citizens of having a ‘vote for life’.
The Labour Party has pledged to –
- Make “no apologies for ruling out tax rises for working people”.
- Have a “renewed focus on tax avoidance by large businesses and the wealthy…”.
- Address unfairness in the tax system and abolish the non-domicile status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period.
- End the use of offshore trusts to avoid inheritance tax, so that everyone who makes their home here in the UK pays their taxes here. This measure is linked to the non-dom changes and is focused on excluded property trusts.
- End Private Equity pay (carried interest) being subject to capital gains tax.
- Not increase National Insurance contributions, VAT or income tax
- Keep corporation tax no higher than a maximum of 25%.
- Not make an individual’s main home subject to capital gains tax.
- Make private school fees subject to VAT.
- Retain the state pension ‘triple-lock’.
- Review the pension landscape to deliver better returns, especially from the opportunities for workplace pensions to consolidation and scale opportunities.
- Look at the potential of imposing requirements for pension funds to invest more in UK markets.
What further changes could the next government make?
Both the Conservative and Labour manifestos make no mention of increasing any tax thresholds. Apart from this, other tax changes have been discussed over the years but never implemented, as follows –
- Narrowing the scope of assets that qualify for inheritance business relief.
- End the rebasing of assets for capital gains tax at death.
- End higher and additional rate income tax relief on pension contributions or introduce a common maximum tax relief rate (for example, a rate of 30%) for pension contributions.
- Reintroduce the pension lifetime allowance (a recent Labour pledge).
- Allow the 5 pence per litre fuel duty tax holiday and stamp duty holiday (currently at nil up to £250,000 and £425,000 for first-time buyers, reducing to £125,000 and £300,000 respectively from March 2025) to end in March 2025.
- Introduce a wealth tax.
Until a tax change is announced, we can only speculate what will happen in the ever-changing world of politics. While we’ll soon know which party will form the next UK government, it will take longer to see how their manifesto pledges pan out and what other reforms and new policies are implemented over the course of the next parliament.
If you have questions about how the upcoming general election might impact your financial planning, contact Blevins Franks today.